MPs should deliver on the pledge to lower fuel taxes

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MPs should deliver on the pledge to lower fuel taxes


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Parliament buildings in Nairobi. FILE PHOTO | NMG

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Summary

  • The current uproar over the heavy taxation of fuel in the country has been a long time in coming, with Kenyans regularly failing to enjoy the benefits of low crude prices due to taxes.
  • We agree with the Energy committee of the National Assembly’s plan to propose lower taxes and levies on petroleum products through the Finance Bill of 2021.
  • The tax levied on a litre of fuel comes to around 45 percent, well above the 30 percent maximum on salaries and corporate earnings, and 16 percent VAT.

The current uproar over the heavy taxation of fuel in the country has been a long time in coming, with Kenyans regularly failing to enjoy the benefits of low crude prices due to taxes.

We agree with the Energy committee of the National Assembly’s plan to propose lower taxes and levies on petroleum products through the Finance Bill of 2021.

The tax levied on a litre of fuel comes to around 45 percent, well above the 30 percent maximum on salaries and corporate earnings, and 16 percent VAT.

This is because for a long time in this country, petrol has been seen as a luxury item for the rich who own cars. The government has conveniently ignored the fact that fuel is an important factor in the production and supply of every essential item.

It has effectively classified fuel among those attracting sin tax, alongside other products such as beer and cigarettes, whose consumption is wholly optional and are therefore rightly levied heavily.

We hope therefore that the committee’s efforts to lower fuel taxes will be successful, given the many trickle-down benefits of lower fuel taxes to the economy.

Expensive fuel leads to higher cost of doing business, higher power charges and higher inflation, thus reducing the spending power of Kenyans and discouraging investment into the country.

Farmers have also complained that the high diesel prices have raised the cost of ploughing, which will raise the cost of food, at a time when income is already depressed by the Covid pandemic.

It is time the government pulled up its socks in revenue mobilisation, and stopped relying too much on the low hanging fruits such as fuel taxes.

Granted, we understand that the State is under pressure to meet the ever-rising expenditure amid lower revenue performance.

The goal should be to keep taxes lower and expand the tax base, in order to protect the more vulnerable members of society from rising living costs.

The government must also learn to live within its means, by cutting unnecessary expenditure that has prompted it to introduce heavy taxes such as the ones on fuel.

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